San Diego seeks okay of contract for Carlsbad project power

San Diego Gas & Electric (SDG&E) on July 21 filed with the California Public Utilities Commission for authority to enter into a long-term power purchase tolling agreement (PPTA) with Carlsbad Energy Center LLC, developer of a gas-fired power project.

The PPTA would allow the utility to purchase the output of a new, efficient natural gas-fired facility, the Carlsbad Energy Center, which would add approximately 600 MW of needed local capacity in SDG&E’s service area. In addition, SDG&E is seeking authority to recover the costs of the PPTA through the commission-approved Cost Allocation Methodology (CAM).

SDG&E said it is pursuing this PPTA to partially fill the local capacity requirement (LCR) need identified by the commission in the Track 4 Decision. The retirement of the San Onofre Nuclear Generating Station (SONGS) has created a need for new resources to meet SDG&E’s needs, the application noted.

The Carlsbad project has a nominal capacity of 600 MW. Since the amount of available capacity from a combustion turbine varies according to ambient conditions at the plant site, capacity payments are capped at 633 MW. The project will consist of six generating units utilizing efficient General Electric LMS100 technology, providing state-of-the-art flexibility with each unit capable of multiple starts and stops per day. The expected online date is Nov, 1, 2017. It will be located at the site of the to-be-shut Encina power plant.

The application noted: “[T]he Carlsbad Energy Center PPTA, with its November 1, 2017 online date, helps facilitate the timely retirement of San Diego’s last OTC units, which are located at Encina. The existing Encina generators consist of five steam turbine generators that utilize OTC technology and are subject to the State’s mandate to retire by December 31, 2017.”

Carlsbad would meet San Diego’s Track 4 conventional need

The commission issued the Track 4 Decision on March 13, which authorized SDG&E to procure up to 800 MW of new resources by 2022 to meet the local capacity needs caused by the retirement of SONGS and the mandatory retirement of once-through cooling (OTC) units in Southern California. The commission directed SDG&E to procure a minimum of 200 MW from preferred resources and/or energy storage and allowed the remaining 600 MW to come from any resource.

“Considering the long lead time associated with the development of gas-fired generation development in the San Diego area, as well as the Commission identified critical need to add new resources in the San Diego LCR area – and the 2017 OTC retirement deadline for Encina – SDG&E decided to negotiate and submit for approval a conventional resources bilateral agreement in advance of issuing an all-source [request for offers],” the application noted.

The PPTA is competitively priced and compares favorably to SDG&E’s most recently approved conventional PPTA with the Pio Pico Energy Center, the application said.

SDG&E said it is aware of one other proposed gas-fired resource located in the San Diego LCR area, the Quail Brush Generation Project. A few years ago, SDG&E signed a PPTA with Quail Brush for 100 MW, which was ultimately rejected by the commission. Since then, Quail Brush requested, and the California Energy Commission granted, a suspension of its application for a permit. Even if Quail Brush were to bid into an all-source RFO, it is not big enough and its online date is too uncertain to be considered a reasonable alternative to the Carlsbad Energy Center, the utility said.

California Energy Commission is reviewing project changes

The California Energy Commission has scheduled a site visit and a commission hearing back in Sacramento in August on recent applications by Carlsbad Energy to make changes in plans for a new gas-fired power plant. On April 29 and May 2, Carlsbad Energy, an indirect wholly owned subsidiary of NRG Energy (NYSE: NRG), submitted two petitions to amend the May 2012 commission decision approving the Carlsbad Energy Center Project (CECP).

The CECP project was approved by the commission in 2012 as a 540-MW natural gas combined cycle generator. Under a May 2 petition, the company would change the project to consist of six simple-cycle turbine generators producing approximately 632 MW.

The amended CECP is proposed to come online by the fourth quarter of 2017, with demolition of the above-grade Encina generating units, buildings, and related equipment to commence as soon as practicable after that.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.